The Middle East’s snail-pace to the Fourth Industrial Revolution

Image courtesy of WEF

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Suzan Elsayed is a Google Policy Fellow at Wamda and an independent researcher focusing on the Fourth Industrial Revolution and future of jobs in Middle East and North Africa (Mena). She previously worked as a strategy consultant in the GCC and London.

 

Every report about the Middle East states that the region has been blessed with a youth bulge, but the blessing becomes a curse as the unemployment rate is the highest in the world at 21 per cent. However, before we start pointing fingers and blaming different institutions and systems, we need to understand that they are all interlinked, it is a complex situation without a single overarching reason.

In 2016, the World Economic Forum (WEF) introduced The Fourth Industrial Revolution (4IR), a concept developed by Klaus Schwab, founder and executive chairman at WEF. In short, it is the societal, political and economic impact of technologies like artificial intelligence (AI), robotics and internet of things (IoT).

As automation and AI start taking a more prominent role in our lives and developed nations take the lead in setting the emerging trends, the key question is how can the Middle East stop playing catch up with the rest of the world and become part of the trendsetters through the empowerment of research and development (R&D).

 Figure 1: Timeline of Industrial Revolutions

 

The 4IR has been gaining traction on top of the ‘Knowledge Economy’ that has been promoted across the regional governments’ visions for the coming years till 2030. As the interconnectivity and access to information and systems increase, the world is becoming more connected and industries and markets become progressively interdependent.

The Middle East is presented as an abundant market for opportunities for global businesses and investors due to its population and its tech-savvy youth. This is demonstrated through the rise in the tech entrepreneurship and the number of science, technology, engineering and mathematics (STEM) students who graduate from universities. While it may seem promising, there is still a lack of fundamental support for R&D and innovation that could push the Middle East as a trendsetter.

The Fourth Industrial Revolution has been forewarning nations and related stakeholders of the increased utilisation of artificial intelligence and the introduction of robotics. This is aimed to utilise the human mind in more creative activities rather than repetitive routines.

This is already visible in our daily lives with examples such as self-checkout tills at supermarkets or AI-powered chatbots and telephone customer service. But, almost all of these are imported technologies and there is a huge gap in the production and export of research and innovation from the Middle East. A recent study conducted by Strategy& states that R&D expenditure in the UAE and Saudi Arabia amount to 0.9 per cent and 0.8 per cent of their gross domestic product (GDP) respectively. Egypt’s R&D expenditure is only 0.7 per cent of its GDP. On the other hand, the 36 countries that comprise the Organisation for Economic Cooperation and Development (OECD) which includes the US and Germany, spend on average 2.5 per cent of their GDP on R&D.  

The study stresses the importance of increasing R&D spending to boost GDP, but this can only be achieved by setting the right foundations for companies, innovators, and researchers.

The need for home-grown R&D ecosystems

Amid the economic plans that highlight a knowledge economy, there is a key component missing – local research and development. The education system across the region lacks significant infrastructure, motivation and skills needed to nurture home-grown R&D, instead, much of it in the region is imported at high cost with a limited amount of knowledge transfer to the local populations.

For international companies, the region is primarily used as a sales and marketing hub and tends to become a ‘trendfollower’ rather than a ‘trendsetter’. This can also be found in the academic front as many universities in the Middle East are not ranked or considered as global destinations for innovation and research. One of the prominent reasons is the lack of a conducive R&D ecosystem not only in the universities but in the society overall. While the 4IR emphasises on innovation in a variety of fields, the Middle East academic front needs to catch up.

Universities play an integral role in the ecosystem of a nation focused on the knowledge economy as they are one of the few places that bring together different skillsets under one roof with the main goal of analysis and innovation.

However, with limited funding for research to universities, PhD researchers and academics – it cultivates a difficult environment for knowledge production and R&D. In the Middle East, a number of countries focus on expenditure on facilities and physical infrastructure rather than the execution of prioritised research. Thus, to diversify the economy and customise the 4IR to meet the region’s needs, the expenditure would need to shift to support the R&D ecosystem.

This would incentivise individuals to create practical research that can face some of the socio-economic challenges of the region or create deep, homegrown and local innovations. The lack of R&D prevents many startups from establishing a base in the region as they are not equipped with the right space to innovate and test. Several Mena-based technical startups, like Medicus AI, may have started in the region but eventually moved to emerging or developed startup ecosystems with better access to R&D and more developed regulations.

The need for clear, prioritised policies for extravagant visions

Over the past decade or so, there has been a trend for outlining extravagant and ambitious country visions in the region that are usually developed by management consulting firms. The visions support the knowledge economy and have good intentions of continuing the development of the nations to make them more favourable to foreign direct investment (FDI) and to reduce the recurring socio-economic issues facing the Arab region. Specifically, all the visions support the promotion of innovation and entrepreneurship with a focus on the youth being the pioneers of progress towards Industry 4.0.

To have R&D included in country visions is one crucial aspect and to prioritise it to align with economic priorities with clear policies is another critical aspect. The recent study by Strategy& also observed the lack of governance structure and framework for R&D in the region, specifically, the GCC.

In order to increase the contribution of startups, the private sector and other individuals in society, will require a firm governance structure that includes clear policies for research fields, funding, aligned communication among the different stakeholders and clear communication to the public.

For instance, in Germany, the federal government formulated the ‘Hightech-Strategie’ where it highlighted the several components of R&D in Germany. This included the required and relevant topics from education, innovation, and technology. The strategy was launched in 2006 and was updated in 2014 to last until 2021 with combined efforts across all the ministries. Since then, it has triggered investments by the federal government reaching up to €27billion.

To reach the advancement and success of Germany might take the countries in the Middle East a while as there are fragmented players and siloed stakeholders in the ecosystem. Nonetheless, in the meantime, fundamentals will need to be revisited such as the education system and changing the cultural mindset of individuals. A large part of this means there needs to be a comprehensive and deep re-education for society.

For instance, according to Egypt’s Ministry of Trade and Investment, many small to medium sized enterprises (SME) in Egypt shy away from digitisation as they do not foresee its future benefits and instead see it as a costly endeavour.  

International companies such as Siemens can then be injected into the ecosystem to try to engage the society through knowledge transfer which brings us to the same issue of the high costs of importing knowledge and the lack of customised 4IR to the country, or region.

The majority of the region’s private and public sectors still have a long journey to go through before they get to the 4IR, as they are currently in the early to mid-stages of the Third Industrial Revolution (3IR) and the progress to digitisation. Thus, many of those extravagant visions require a strong coordination and communication plan to ensure all the society are involved and the visions are based on aligned needs and priorities across the sectors.

The Fourth Industrial Revolution may seem like a buzzword utilised by the elites, but it will no doubt impact the rest of the population sooner or later and our region is not hiding away from it.

With a youth bulge that doesn’t seem to be slowing down anytime soon and a growing demand for progress with socio-economic challenges such as job opportunities or the demand for an improved health or education system, it is critical to start having fruitful dialogues that result in action, soon.

 

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